Conclusions of the IMF mission to Romania

The group of international lenders who are currently in Bucharest assessing Romanias standby agreement are still negotiating with the Government in Bucharest.

Florentin Căpitănescu, 10.02.2015, 13:18

In recent years, struggling with the effects of the financial crisis, Romania’s external lenders, the IMF, the World Bank and the European Commission, have weighed in on decision-making in Bucharest, particularly in terms of reform. Many pundits claim that if Romania hadn’t committed to implementing certain reforms under its agreement with international lenders, many of those measures, although unpopular, wouldn’t have materialized. Still there were times when negotiations between the two parties didn’t run so smoothly. That is also the case of the troika’s recent assessment mission to Bucharest, which came to an end this Tuesday. No consensus was reached, for the time being at least, on the liberalization of gas prices and on the privatization of certain energy companies, two measures the IMF is adamant about but which the left-of-centre Government refuses to accept. Prime Minister Victor Ponta claims the liberalization would entail a hike in gas prices, for both home and industrial users.

“The request of the European Commission and the IMF refers to an increase in gas prices starting April 1, from 53.3 lei per megawatt to 62 lei per megawatt, which we see as unsustainable. The second point on which we failed to reach an agreement was the privatization of Hunedoara and Oltenia state-owned companies, which the troika wants us to restructure. In our view, that would not help save the coal energy industry and the jobs in that sector. On the contrary, those measures will in the long term cause that sector to shrink radically in a few years’ time”.

In the absence of a clear-cut consensus, the IMF did not submit its usual letter of intent. Talks between Romania and its lenders are due to resume in April. Viorel Stefan, the president of the Budget and Finance Committee of the Chamber of Deputies explains.

“The agreement still stands. The fact that there is no letter of intent signals a temporary suspension of the agreement, while Government experts and representatives of lending institutions would reach consensus over any pending issues”.

The Liberals in opposition see the negotiations as a failure. Liberal MP Gheorghe Ialomitianu, a former Finance Minister:

“The IMF believes the current Government did nothing to abide by its commitments, the Government on the other hand claims everything is fine. We therefore find ourselves in a deadlock. This delicate and uncertain situation is also a matter of concern for the business sector”.

Romania’s current standby agreement with the IMF is worth 2 billion Euros, money the authorities may access in case of emergency.